Advanced filters
Job Role:
Content Type:
Job Role:
Content Type:

Market Briefing: Trading Ranges Shrink Ahead of March Inflation Print

CalendarApril 12, 2023

With a critical US inflation report looming at 8:30, the dollar is holding steady, Treasury yields are edging higher, and equity futures are seeing subdued flows. Most G10 currencies are modestly stronger against the greenback.

This morning’s consumer price update could prove pivotal ahead of the Federal Reserve’s May decision, with a surprising print potentially reigniting volatility in fixed income markets as rate expectations shift. Consensus estimates suggest headline prices will have climbed around 5.2 percent year-over-year in March, down from 6 percent in the prior month as an early-2022 surge in energy costs is washed out of the data. Non-energy, non-food inflation is seen rising 5.6 percent, up from 5.5 percent in February. On a month-over-month basis, the consumer price index is expected to rise 0.2 percent, with the core measure up 0.4 percent - with both decelerating from the previous month.

This afternoon’s Fed minutes could also prove interesting. In comments yesterday, several officials expressed trepidation at the prospect of further rate hikes - suggesting that the meeting record could show a greater degree of dovish dissent on the central bank’s rate-setting committee than markets might anticipate. Austan Goolsbee, the newly-appointed head of the Chicago Fed, warned “Given how uncertainty abounds about where these financial headwinds are going, I think we need to be cautious. We should gather further data and be careful about raising rates too aggressively until we see how much work the headwinds are doing for us in getting down inflation”. Philly’s Patrick Harker said “Since the full impact of monetary policy actions can take as much as 18 months to work its way through the economy, we will continue to look closely at available data to determine what, if any, additional actions we may need to take”.

Market-implied odds on a hike at the central bank’s May meeting are holding near the 75 percent mark, but the front end of the rate curve remains depressed with at least two (almost three) quarter-point cuts priced in between July and the end of the year.

The yen is trading near a one-month low after Bank of Japan Governor Kazuo Ueda said “Given the current economic, price and financial conditions, I think it’s appropriate to keep up the current yield curve control”. Expectations for a shift in the central bank’s policy framework have plummeted in the face of a receding inflationary threat and ongoing steady-as-she-goes rhetoric from Mr. Ueda, helping tilt rate differentials further against the currency. Odds on an adjustment at the April meeting are rapidly nearing zero.

The Canadian dollar is stuck in the middle of its recent trading range ahead of this morning’s rate decision. The Bank of Canada is widely (perhaps universally) expected to maintain a hawkish bias in its communications while maintaining rates at prevailing levels - but with short positioning in the currency markets at relatively elevated levels, almost any element of surprise in the accompanying statement or monetary policy report could trigger a meaningful move in the exchange rate.




Upcoming Events


USD Consumer Price Index Index, March

CAD    Bank of Canada Rate Decision

USD    Department of Energy Weekly Inventories

USD    Federal Reserve Meeting Minutes

AUD    Employment Report, March


GBP Trade Balance, February

GBP    Monthly Gross Domestic Product, February

USD    Weekly Jobless Claims

MXN    Bank of Mexico, Monetary Policy Minutes


USD Retail Sales Advance, March

CAD    Existing Home Sales, March

USD    University of Michigan Sentiment, April Preliminary

USD    Baker Hughes Weekly Rig Count


Karl Schamotta

Karl Schamotta

Chief Market Strategist

Gain insights into developments in global currency graphSubscribe